2017-10-20

China Has a Garbage Bubble as Paper Prices Soar

Recyclable paper prices are soaring in China. A wild price rise has created "junk kings" in China who move piles of refuse instead of low-rated credit.

The iFeng link includes a video with some of the "junk kings" of Dalian. They talk about how some of the paper would be thrown out, but today they don't toss anything and sell it instead. Prices are moving multiple times in a single day as money rushes into the latest investment boom. The monthly income of one "junk king" has doubled from 5,000 yuan to more than 10,000 yuan.

The spark for this boom was a ban on the importation of foreign trash.

The city’s system for dealing with its paper waste has been failing since China in July imposed a ban on imports of 24 types of rubbish, as part of a campaign against “foreign garbage” and environmental pollution, including unsorted scrap paper.

As a result of the impasse, the manager of a major paper mill in southern China told Reuters the price of finished paper had doubled to 6,000 yuan ($902) per ton from 3,000 yuan as supplies of the raw material shrink.

That is hurting everyone from e-commerce sites to exporters.

Alibaba’s upcoming ”Singles’ Day online shopping festival on November 11, which posted more than 120 billion yuan ($18.1 billion) in sales last year, is heavily reliant on such packaging.

A drop in supply causes a rise in prices, but a boom is triggered by an increase in the supply of money and credit. The rally in junk is the downstream result of commodities market speculation that even government officials have blamed on excess credit.

Li Youan Dalian scrap recycler: scrap prices are rising, including plastics, cardboard, all waste are rising. Mineral water bottle should be up over last year, rose about 30 percent. Is now selling about five to four four seven one kilogram of paper gains would be greater, under normal circumstances, paper, general paper in previous years, more than a thousand dollars a ton, this year is more than two thousand one ton of .

Scrap price hikes, so his business is extremely busy, reporters saw just a few minutes there are 56 individuals to sell scrap, but due to his busy again this year hired two people to help, but in order to increase the amount of recycling he is no longer just waiting for collection at home every afternoon, he took the initiative to the neighboring village to the acquisition of waste. In this way a month down the overall recovery of the amount, compared to the same period last year increased by about 20%, while in recent months, his monthly income has reached the million, compared to last year, an increase of nearly doubled.

It is understood that this year the overall recovery in scrap prices, domestic scrap prices in 1600 yuan / ton, up 14%, aluminum prices at around 10,500 yuan / ton, up 23%, paper prices rose the most, currently the Recycle Bin recovery of prices in the 2100 yuan / ton, up more than doubled. Prices rose sharply, driving the overall industry to pick up, "Polan Wang" re-active.

China's ban on "foreign garbage" is partly responsible, but the main culprit is the supply of money and credit racing around China's economy in search of a home as the iFeng article notes:

In fact, the fluctuation of recycling prices is inextricably linked to the entire commodity market, and its rise this year mainly due to upstream manufacturing, building materials industry increased demand, as well as major engineering and infrastructure investment to accelerate, in a rise in the price, gains in prices of waste paper can be described as ferocious.

There's only one piece of waste paper whose fundamental value is ferociously declining: the Chinese yuan.